Time for a Retrospective Graduate Tax?

The escalating movement against cuts in higher education teaching funding, linked to potentially huge hikes in teaching fees to £9,000 a year, has taken most commentators by surprise. The scale of the protests, so quickly after policy was announced, is unusual and suggests a deep reaction is underway.

The government and their cheers leaders in Universities UK, representing universities, say “there is no alternative” – but of course there are other ways of tackling this issue.

The fundamental problems are easily set out – long before the state’s financial crisis, the rise in participation rates in higher education raised huge questions about how this was to be paid for?

Funding it all out of general taxation was decreasingly an option – effectively it meant redistributing from the poor to the middle and rich. Why should cleaners pay for the kids of the middle classes to go to University, as it is usually posed? Of course, it was never quite as simple as that, especially as more poorer peoples kids started to go to University, but there was sufficient truth in this to make the original introduction of tuition fees possible.

Many University leaders campaigned to increase tuition fees under the naïve assumption that government – any government – would let them increase their overall funding.

This was always doubtful, but as the public finance crisis unfolded it became obvious that any increase in fees would simply be used by government as a way of cutting funding to universities.

The reality, when it came, was a shock even to the advocates of increasing fees – the 40% cut in HE funding, mostly from teaching, is a staggering reduction. It represents a complete cessation of funding for social science and humanities teaching and will lead to a tripling of fees. With maintenance and tuition fee loans, graduates could end up owing in excess of £40,000 when they leave university.

The obvious solution to all of this is to fund university teaching not from fees or general taxation but from a specific tax on those who benefit – a graduate tax. The main objections seem to be that it would take far to long for such a tax to build up into a sufficient income stream to fund current teaching. We’ll leave aside the fact the fees and loans scheme preferred by the government has the same problem, and simply make the obvious suggestion – make the graduate tax retrospective.

Those of us who benefitted from a much more heavily subsidised higher education system in the 60s and 70s could make a significant contribution to ‘generational equality’. The spreading of the tax over a much larger population would keep it much lower. Those who did not benefit from HE would not have to pay.

My own Universities President and Vice Chancellor, Dame Nancy Rothwell, is clearly unhappy about government policy. She has written

“The national day of action yesterday demonstrated the real and wide concern regarding cuts to the higher education budget and the prospect of significantly higher fees for students.

As I have repeatedly made clear, I share these concerns. The 40% cut in the higher education budget over four years means that universities have been particularly harshly treated, especially given the cuts that we have already had imposed on us by the last government.

A little more detail is now emerging and it looks increasingly likely that if these plans become reality they could have a devastating effect on many British universities. I have stated many times, and will do so again, that we must rigorously defend disproportionate cuts to the arts and humanities, which would have very serious implications both here in the UK and in societies across the world.”

I couldn’t agree more. A pity more VC’s aren’t joining her. We face the most regressive changes in HE in years – and the protests aren’t likely to subside any time soon.

About Colin Talbot

Colin Talbot is a Professor of Government, a former Specialist Advisor to the House of Commons Treasury Select Committee and the Public Administration Select Committee and has appeared as expert witness many times in Parliament, the Scottish Parliament and NI Assembly. He's also advised Governments from the USA to Japan.

Brilliant! Thank you for writing about this. It is surprising that such an obvious idea has not been talked about more widely. Despite the Lib Dems banging on about how “fair” their proposals are, they are fundamentally unfair in generational terms. The current generation, which had its education paid for by the taxpayers of the previous generation, now wants to relinquish its responsibility to educate the next generation. David Willetts, of all people, should know about it because he wrote the book on generational unfairness. The Lib Dems should vote down the current proposals and force the Government to go back to the drawing board. True graduate tax is the way forward.